$388 MILLION COMPENSATION TO SINGTEL

Mr Steve Chia Kiah Hong asked the Acting Minister for Information, Communications and the Arts why his Ministry did not carry out a simple check with the Inland Revenue Authority of Singapore regarding the tax of S$388 million before paying out the compensation to SingTel and who is going to be responsible for the loss to the Government.

Mr David T. E. Lim: The 1997 compensation to Singapore Telecommunications (SingTel) was for the premature loss of its monopoly rights. Deloitte and Touche, an international accounting firm, was engaged by the Telecommunications Authority of Singapore (now the Info-communications Development Authority of Singapore) to work out the compensation amount. They computed the compensation based on the loss of future earnings as a result of the early expiry of SingTel's monopoly rights.

A review committee of civil servants endorsed the sum recommended. As it was based on loss of earnings, and as earnings would normally be subject to tax, the committee worked on the basis that the compensation was taxable. As this was a natural assumption, it never occurred to the committee to ask the Inland Revenue Authority of Singapore (IRAS) for a specific ruling on tax. Unfortunately, subsequent events showed that the committee was mistaken.

The chronology confirms that the error was an honest mistake arising from a wrong assumption by the 1997 review committee. While a lesson has been learnt from the error, it would be inappropriate to punish the review committee or any of its members for it. To do so would only encourage a culture where civil servants shy away from taking responsibilities, and avoid making decisions for fear of committing mistakes. This is the opposite of what we are trying to achieve, not just in the civil service but in Singapore society. However, it is no excuse for civil servants not to endeavour to get their facts right, and to check and double-check details and assumptions.